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Oasys Water had developed a proprietary water treatment technology based on an innovative Forward Osmosis process that could remove dissolved solids from water more effectively and efficiently than existing technologies. As Oasys looked to scale, it was exploring partnerships with various incumbent firms: the most serious were with a set of international oil & gas production companies (IOCs), a global oil and gas (O&G) services provider called National Oilwell Varco (NOV), and Woteer, a Chinese EPC company specializing in industrial water and wastewater systems. Woteer had expressed an interest in gaining exclusive access to Oasys' forward osmosis technology for water treatment applications in China in exchange for an equity investment. Matheson did not have the luxury of choosing a partner solely on the merits of its strategic value to Oasys. He was forced to evaluate the strategic benefit alongside the likelihood of actually closing a deal, the specific terms of each deal, and especially the speed with which a deal could be closed, given Oasys' pressing financing needs. Should he do a deal with Woteer, and if so, on what terms?

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A battery company is running out of money and has not met all of its milestones. The year is 2012 and many cleantech investors have decided to pull back. Fast Ion Battery needs a $5 million bridge round, but one of its three investors has refused to continue funding the company. John Davidson, a partner at Ware Street Capital and the lead investor in Fast Ion, must decide whether or not to save the company.

John Davidson, a partner at Ware Street Capital (WSC) and a board member at Fast Ion Battery, had just received a phone call from Don Lerner at Bluelock Ventures telling him that Bluelock would not participate in the $ 5 bridge financing for Fast Ion Battery. Lerner's call could not have come at a worse time. Fast Ion was running out of cash and needed another round of financing urgently to continue developing its revolutionary battery. Davidson faced a real dilemma. On the one hand, the company was finally gaining traction with developing its technology and the search to replace the current CEO had yielded two prospective candidates who were extremely well-suited to drive the company forward with a more capital efficient business model. On the other hand, Ware Street Capital and the two other investors had already invested $10 million into a company that had not performed up to investors' expectations. Would they be throwing more good money after bad by providing the bridge financing? Moreover, would other, later stage, investors be willing to provide the significant amounts of capital required to get the company to an exit event given the changing climate for clean tech investments? These questions became more pressing following Lerner's call that Bluelock had chosen not to continue backing Fast Ion. Was Fast Ion Battery worth saving?

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"Financing Entrepreneurial Ventures" introduces students to the key issues involved in the financing of entrepreneurial enterprises. The Reading begins by examining how business models shape external financing requirements. It then contrasts the choice to bootstrap with the option to raise external funds, as well as the traits of debt versus equity investment. Students learn about the different types of equity investors-including angels, VCs, and strategic investors-and follow an entrepreneurial venture's path through the financing stages. Students also examine how entrepreneurs can adjust business models to match financial conditions, and how they can reduce financing needs through alternative models such as partnerships. Finally, the Reading covers emerging funding models-such as crowdsourcing and accelerators-and the global aspects of entrepreneurial finance. There are 6 Interactive Illustrations included in the Reading: "Calculating a Cumulative Cash Flow Curve," "Asset Intensity Ratio," "Building a Cap Table," "How Investor Expectations and Target Returns Drive Company Ownership," "Payouts from Simple Equity and Convertible Investments," and "Seed Note Ownership and Value."

Additionally, a supplemental section at the end of the Reading covers the details of different debt financing forms, the structures of VC firms and angel investment groups, and the forms of entrepreneurial finance needed for breakthrough discoveries.

learning objective:

1. Describe the intimate connection between business models and the financing needs of ventures 2. Provide an overview of the entrepreneurial finance landscape and the traits of various financiers 3. Identify for students critical issues in their financing choices, such as whether VC investment aligns with their personal motivations 4. Impart tools that students can use as they contemplate the external financing of their ventures

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In this note, we examine the extent to which venture capital is adequately positioned for the rapid commercialization of clean energy technologies in the United States. The need for a revolution in clean energy is driven not just by environmental consequences of energy use, but also by the need for energy security, to address growing concerns about a crisis in the balance of payments, and as a potentially important source of domestic jobs. Our premise in this note is that a key aspect of such widespread change is that these issues cannot be "solved" by a single technology. Rather, technological changes will have to be pervasive and will require a whole range of different products and processes to come to market. Some of the technological progress will come from incremental innovations that do not depend on venture capital.

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Endeavor Global was a nonprofit that for 15 years had worked to nurture entrepreneurship in emerging markets by selecting local high-impact entrepreneurs for mentoring and aid in scaling up their businesses from committed local business leaders. In summer 2012, Endeavor received an invitation to replicate its model in Miami, Florida, and the Endeavor board was meeting to debate the value of such a move. At issue were questions of organizational mission and the relevance of Miami, as well as branding, funding, and focus. The invitation had come in the midst of a major expansion effort by Endeavor into new emerging markets and threatened to disrupt those efforts and tax a new hybrid funding model which Endeavor was implementing. Founder Linda Rottenberg with the support of her board must determine the implications of possibly opening in Miami on Endeavor's resources and mission? How could Rottenberg justify to overseas affiliates a choice to invest in a first-world city?

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<p>Young, and particularly high-growth ventures often need to raise significant external finance, since their internal cash flow is usually insufficient to support the investments needed to grow. Although raising equity from venture capital or angel investors is the most well-known source of external finance for high-growth ventures, many entrepreneurs, particularly small business owners, rely on debt and other non-equity sources of capital to finance their ventures, either because equity capital is not available to them or because they want to avoid the ownership dilution and governance constraints associated with equity investments.</p><p>This note focuses on these non-equity sources of financing for entrepreneurs, paying particular attention to how the emergence of new technologies in risk assessment have expanded their availability for young firms.</p>

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<p>In early 2010, Naval Ravikant and Babak Nivi posted a list of angel investors on the Venture Hacks blog as a resource for founders looking for funding prior to seeking venture capital. The list quickly evolved into AngelList, a separate matchmaking platform for founders and investors to make early stage fundraising more efficient. By June 2013, AngelList had garnered substantial media attention, and was used by many high profile angel investors and venture capitalists. It had approximately 100,000 startups and 18,000 accredited investors. Since the site was launched, almost 40 startups on AngelList had been acquired, and over 2,000 startups had been funded. For most entrepreneurs, posting a profile on AngelList had become as commonplace as setting up a personal profile on Facebook or LinkedIn. Most recently, the site added Invest Online, a new product that in partnership with SecondMarket, allowed accredited investors to make small investments-as low as $1,000-in startups at the same terms as larger investors.</p><p>While the co-founders were proud of AngelList's growth, as of June 2013, they were not charging for its use and had not yet determined its business model. Ravikant and Nivi wondered if they should reconsider and have AngelList apply for broker dealer status so it could charge transaction fees, but they were reluctant to enter what they considered a regulatory minefield. The recently passed JOBS Act was expected to relax constraints around crowdfunding, and Nivi and Ravikant knew that would be a logical extension for AngelList as well. Finally, they wondered if they should avoid any potential regulatory issues altogether and instead focus on generating revenue primarily from recruiting and other ancillary services.</p>

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Sidharth Gupta, CEO of Getit Infomediary Ltd, had just received a term sheet from Helion Venture Partners (Helion), one of India's independent venture capital firms, offering to invest Rs 200 million in return for an equity stake in the company. His dream of transforming Getit from a regional print company into a digital company with broad geographical reach was within grasp. However, Gupta had to act fast; Helion's term sheet would expire in a fortnight if unexecuted. Bank finance and trade credit had tided Getit through tough times in the past, and Getit still had a Rs 250 million bank line to draw on. Should he take the venture capital investment? And if so, implications would this have for his family business and for him personally?

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John Gilleland, CEO of TerraPower, returned to his office after a lengthy meeting with potential investors. It was October 2012, and TerraPower was in the process of raising a $200M Series C round to finance the ongoing development of its next-generation nuclear reactor. Though early in the fundraising process, Gilleland noted that this most recent conversation was similar to conversations with other interested cleantech growth equity investors. The conversations circled around a common theme: "This is the biggest idea that's ever been presented at our partners' meeting. We love what you're doing, but it's not right for us as an investment." Outside of raising money from typical growth equity and infrastructure funds, Gilleland could partner with a government and/or form a joint venture with an existing nuclear power player. Reliance Industries as an investor in TerraPower could provide an entry point into the fast growing Indian market. At the same time, Gilleland and Gates had talked with China National Nuclear Corp. about a possible cooperation with TerraPower. Whom should Gilleland call next?

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This note introduces convertible notes in angel financing. It begins by delineating the differences between a priced and non-priced round. It then describes a specific example of a convertible note, with attention paid to technical details regarding valuation caps

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